Retailing, which defines the practice of selling goods and services to customers through varying channels in order to generate profits, is increasingly becoming the 21st century’s most fascinating, multifaceted and critical segment of business in most advanced and emerging economies. This is because the retailing industry is continually being buffeted by simultaneously emerging forces that affect its overall progress. According to Swartz (2000, p.126), the rapidly growing competition in retailing formats, advancement in online retailing, emergence of Radio Frequency Identification Technology, increase in customer-level information accessibility, and global development of key retail chains have all impacted on overall progress in the retailing industry. As such, retailing companies everywhere are working hard to refine their business activities by trimming timescales as well as integrating efficient practices to be competitive. E-commerce and smart warehousing are key practices that retailing companies integrate in their operations to be competitive (Peterson 2002, p.9). E-commerce describes any business or economic transaction that allows for the transfer of information through the internet. On the other hand, smart warehousing defines the practice of storing goods in commercial buildings while relying on smart technology to enhance efficiency. The practice relies on best practices so as to meet ever changing consumer demands on the one hand and budget constraints placed by the business on the other (OECD 1999, p.62). This paper investigates how e-commerce and smart warehousing benefit retail for business advantage. This analysis will specifically be limited to investigating the various smart warehousing systems used in today’s retailing industry, how e-commerce is being aligned to warehousing, how retail integrates smart warehousing into its business process, and the risks associated with smart warehousing.
According to Gunasekarana (2005, p.423) research methodology defines the process of gathering relevant data in order to make valid conclusions about the study topic. A systematic review of pertinent literature will be employed in this study so as to help gather relevant information related to the current subject area. Secondary sources that include journals, books, encyclopedias, reputable websites, and other relevant articles will be reviewed. Databases like EBSCO Interface, ProQuest, Emerald and IBISWorld will be used in this review. Search terms that include retailing, smart warehousing, online retailing, e-commerce and retailing as well as e-commerce and smart warehousing will be employed. The inclusion criteria that will guide this literature search will include all literature that is relevant to the study topic and are not older than ten years. Citation analysis will also be employed during the literature search where literature that is mostly cited in the identified sources will be chosen. In collecting relevant data, a first read of the indentified articles will be carried out to determine the information that the articles contain. This will particularly include reading the abstract of the identified articles so as to establish whether they are worth further reading. A critical analysis of the identified sources will then be conducted and systematic information that can significantly respond to the question of inquiry generated.
Scope defines the parameters within which a study will be operating in addressing the question of inquiry. It refers to the research domain that describes what will be included in the study and what will not be included. This study investigates how e-commerce and smart warehousing benefit retail for business advantage. It will narrow down its focus on the smart warehousing systems used in today’s retailing industry, the alignment of e-commerce to warehousing, the integration of smart warehousing in retail business processes and risks associated with smart warehousing. It will include portions of logistics that are linked to online retailing and exclude those portions that are linked to the traditional retailing strategy. This is because the study is mainly concerned about retailing activities carried out through the internet and not those conducted through the traditional means (Gunasekarana 2005, p.430).
With rapid advancement in the retailing industry in the 21st century, many companies are employing advanced business strategies that can help to increase their market share on one hand and enhance product sourcing efficiency on the other. With most of these companies operating in the global market, consumer demands, outsourcing as well as business operations within the industry demand that they would deliver products as fast as possible and the lowest cost possible (Peterson 2002, p.11). E-commerce has thus become as important platform offering critical opportunities for effective logistics management to ensure effective, smooth and timely movement of materials and products along a company’s supply chain. Companies are therefore employing smart warehousing systems that can easily be integrated with e-commerce to enhance overall business efficiency.
Warehousing within the retail supply chain is a critical process that helps to control the transition and storage of materials and products within a specially made commercial building in order to enhance business transactions that range from shipping, receiving and picking. The rapidly changing nature of the global retailing industry is increasingly demanding that the supply chain is no longer a cost center but instead a profit center that will enhance the revenue and overall productivity of a company (Swartz 2000, p.130). This explains why modern retailing companies are employing smart warehousing systems that integrate modern processes, technological expertise, equipments and skilled workforce to enhance overall company profitability. Similarly, consumers are seeking for warehousing solutions that can meet their long-term needs while on the other hand being cost effective for their current needs and complexities. According to Sparks (2000, p.41), most companies are experiencing increasing consumer volumes as well as the SKU proliferation, which demands for steady warehousing solutions that can handle such demands for a lengthy period of time. While most companies find it challenging to shift warehousing operations from one commercial facility to another within a short period of time, they employ smart warehousing systems that can effectively address these consumer demands (Peterson 2002, p.14). Another driving factor behind companies’ decision to employ smart warehousing systems is that most of them believe that their distribution centers will, in the near future, be mechanized as well as operated in highly sophisticated warehouse management approaches. As such, companies are continually integrating high density warehouses in their supply chains in order to ensure that they can successfully undertake multifaceted roles within emerging logistic centers. This has seen the supply chain managers unanimously taking the opinion that adopting smart warehousing systems is the only way through which companies can meet the growing product volumes as well as the complexities in the future (OECD 1999, p.69).
As argued by Cortada (2004, p.44), the fact that consumers in the modern business environment do not tolerate any mistakes justifies the choice for companies in the retail industry to adopt smart warehousing systems. This is because companies intend to enable their warehouses to transfer products that are in absolute perfection. There are also increasing numbers of retail stores in today’s business environment and a combined decline in supply chain layers, which render the onus of managing a complicated supply chain network and damaged deliveries irrelevant. As a result, retail companies have diversified their warehouse processes from simplistic to more complex procedures that do not only hand sequential checks but which also require an entirely distinct approach to warehouse design. Research by Burt, S and Sparks (2003, p.270) further showed that the need to enhance responsiveness in the retail supply chain is another driving force that can explain why companies in today’s retailing industry use smart warehousing. Findings from this inquiry showed that customers in today’s retailing industry are not only concerned about perfection but they also want to obtain desired products instantly. They require such products to be fresh and in the right quality irrespective of whether they obtain them from the nearby retail store or online. As such, today’s companies are increasingly adopting smart warehousing systems that would enhance swift actions in their supply chains and responsiveness in their warehouses. Further inquiry by Cortada (2004, p.51) showed that the need to convert warehouses into conducive environments favorable for the modern modes of transportation motivates companies to adopt smart warehousing systems. While supply chain operations do not begin or end at the gates of warehouses, retail companies are modifying their warehouses to enhance usage of the ever-transforming multi-modal method of transportation. As such, smart warehousing systems are being deployed to enhance movement of containerized loads, large trucks, and material handling tools like forklifts. These factors can be summarized in a diagram as follows:
Literature indicates that Automated Storage/Retrieval System, which is also known as AS/AR, is one of the smart warehousing systems used in today’s retail industry. According to Petersen (2004, p.11), the AS/AR is a warehousing system that is controlled using computers and it entails storing as well as /retrieving pallets by use of automated stacker cranes. These stacker cranes move concurrently in a Chebyshev travel. The Chebyshev travel entails a simultaneous movement in a horizontal as well as a vertical direction and it is applicable when the stacker crane is operating on basis of a single as well as a dual command. On the single command basis, the AS/AR accomplishes one storage or retrieval function while on the dual command basis, the AS/AR accomplishes a dual function, which entails a storage function and a subsequent retrieval function. An investigation by OECD (1999, p.73) showed that companies employing the AS/AR warehousing systems usually specify the type of product and quantity required. They then use the computer to establish where in the storage area the specified item can be found and schedule for its retrieval. The computer further directs the Storage and retrieval equipment to the place where the item needed is stored and subsequently to the location where it will deposit the item. Conveyors as well as automated vehicles can constitute to part of an AS/AR system and these may be used to move loads within the storage area as well as the manufacturing or loading area (Gunasekarana 2005, p.441).
This warehousing system is mainly employed in healthcare and health management retail companies in Mid-Atlantic region. Inventory managers in these companies employ this technology to store specimen, tissue blocks and other laboratory supplies. Most of these facilities have established a single workstation comprising of dual-access carousels that can easily be used to store or retrieve supplies under a single or dual command (Hwang and Song 1993, p.76).
Using the AS/AR warehousing can benefit a retail company by significantly reducing labor needed to move products into and out of the company’s inventory. This is because the system can move products in any desired direction, which saves human work force the effort of moving products up, down or across the inventory. The system is also beneficial as it enhances a more accurate tracking of where products are stored within the warehouse. As explained by Lefebvre (2006, 3), the computer system helps store managers to determine the specific place where a particular item is located, which ensures that only the item needed is moved. This ensures that delicate products are not interfered with and the store does not get disorganized. Another significant benefit that the AS/AR warehousing system can render to a retail company is that it saves cost and space. This is because the system stores products more densely as compared to stores where items are retrieved manually. This saves the cost that the company would spend securing another inventory store. The diagram below represents an AS/AR warehousing system storing items on the ground level (Yavuz 2012, p.44).
Literature further indicates that man aboard, which is also known as the Man-On-Board (MOB) warehousing system is largely being used in smart warehousing. As explained by Petersen (2004, p.13), MOB is a form of automated warehousing system that uses an automatic picker with space that can fit a worker. In this system, the worker operates in a specially made truck, like the order picking or narrow-aisle truck, where he undertakes multiple commands to accomplish several storage and retrieval functions. These multiple commands are usually carried out between successful revisit to the input as well as the output point. The picker from within which the worker operates is usually adhered to a rail located on the floor or may be suspended from a rail adhered along the ceiling. The system can be operated through manual as well as the automated means where the operator can direct it to take him to a desired product location and lift him to a suitable shelving height (Lefebvre 2006, p.6). The MOB warehousing system is commonly used in most manufacturing firms in Korea, which mainly include those producing small and delicate products like aero, electric as well as the electronic products. An MOB can benefit a retail company as it ensures maximum utilization of available space including the space that is as high as the ceiling level. This is because the system’s storage approach capacity is not limited by the height of an order picker. The fact that the picker is capable of riding along the rail on the ceiling enables it to move to high storage locations within the store. This generates significant advantage to business as it ensures that companies to do incur extra costs in securing more storage locations (Hwang and Song 1993, p.79).
Reliable evidence from the reviewed literature also indicates that automatic loading and unloading vehicles, which are also known as the smart loaders are among the smart warehousing systems used in the modern retailing industry. Literature complied by Van Den Berg (1999, p.520), states that smart loaders are automated storage and retrieval equipments that can move items from palletizers, staging areas, storage locations and trailers and place them at any desired location within the warehouse. The system is fitted with LADAR technology that allows it to automatically adapt to different trailers so the warehouse operator will not need to make any trailer modification. This adjustable technology enables the system operator to pick up items and pile them on the trailer with pinpoint accuracy using varying configurations that allow for the optimization of the trailer space. This warehousing system is specifically applicable in retailing companies where loading and unloading of uniform products is prevalent. Such companies include those trading in beverages, poultry products, massive chemicals and bulk papers (Yavuz 2012, p.60).
Research indicates that smart loaders can benefit a retail company because they enhance safety and reduce possible damage of materials and products. As explained by Petersen (2004, p.17), smart loading trailers are fitted with safety gadgets that are capable of detecting individuals and other obstructions getting into their way. This saves companies from incurring costs associated with compensating individuals experiencing on-the-job safety risks thereby contributing to significant business advantage. Similarly, the smart loading vehicles handle loads with extreme care thereby ensuring that possible damage of products and materials is eliminated. This enhances significant business advantage as it can save retail companies from incurring extra expenses associated with replacing any damaged goods. According to Sparks (2000, 67), smart loaders can also benefit a retail company by significantly reducing labor as well as the operating costs. This is because the systems work 24/7, which perpetuates efficient operations while reducing overall waiting time within the shipment areas. This significantly reduces the total labor cost and operational expenses incurred, which further adds to overall business advantage. The diagram below represents a smart loader moving products in a warehouse (Lefebvre 2006, p.9).
E-commerce is increasingly reshaping the global retail industry and the rapid online shopping expansion demand that storeowners would review their mode of business operation. Similarly, retail companies that entirely sell their products through the internet are shifting their business strategy to respond the rapidly increasing consumer demand for more flexible shopping choices. While most of these transformations will ultimately affect the way retailers control their supply chains, they have come up with strategies through they can align e-commerce with their supply chains to ensure consumer needs are effectively addressed. Literature indicates that the Radio-Frequency Identification (RFID) system is the key platform through which e-commerce is being aligned to warehousing. As explained by Saar (2002, p.133), a basic RFID system constitutes of three layers, which are a tag with a chip, a reader containing antennas as well as a computer. The tag is usually embedded to a physical item and communicated through radio frequencies using the reader’s antennas. The reader then conveys the location as well as the identification of the physical item to a computer, which then begins or adjusts a business activity automatically. When coupled with wireless technology and the warehouse management systems, RFID allows system managers to dispense important information about products circulating in the supply chain in a timely and precise way (Van Den Berg 1999, p.227). While these systems enhance access through a global network, systems operators can truck items as they move along the supply chain and in the inventory. This technology allows systems operators to develop a networked database that that can be revised in real time to reflect movement and location of products within the warehouse. This information can then be shared among the supply chain stakeholders, who can be situated within and outside the organization (Pavitt, D., 1997, p.38).
Wal-wart is an example of a retail company that has aligned the RFID with its warehousing system. The company employs this technology when receiving goods arriving at the warehouse. According to Want (2004, p.57), receiving goods is time consuming as inventory managers have to follow specific procedures in verifying they type, quality and quantity of goods arriving at the warehouse. The activity can also be prone to human error particularly when goods arriving are in large volumes. Wal-mart thus employs this technology to verify goods arriving at the warehouse automatically, thereby saving time and enhancing efficiency. The company further employs the RFID to move goods received into the inventory and place them in their specified storage locations. The company also uses this technology in order picking thereby simplifying the verification process involved in consolidating customer orders.
Literature shows that aligning e-commerce with warehousing through integrating the RFID in the supply chain benefits the retail industry by saving a significant amount of time, energy and money spent in trying to track items along the supply chain. This is because the RFID technology enables supply chain stakeholders to track the exact location of a product in real time. In instances, Wal-mart uses this technology to verify details of products stored in conveyances like containers, trucks, and shopping carts, without necessarily opening the conveyance (Pavitt 1997, p.40). This saves time and energy spent in business operations, which generates significant business advantage. Integrating the RFID technology in the retail supply chain is further beneficial in that it perpetuates quantum leaps that are generated from cost effective inventory management strategies. Wal-mart for example employs the RFID technology in order picking to verify the location and quantity of goods to consolidate customer order without disorganizing the entire inventory. This generates significant business advantage especially in an industry that is experiencing low margins and hence aiming to reduce inventory management costs significantly. Aligning RFID with warehousing enhances inventory management, which in return reduces repeated losses of supplies due to theft, fraud, and inaccuracy. This generates significant benefits to retailing companies, as they are able to avoid lost sales and subsequent discontentment within the corporate and among the consumers (Saar 2002, p.141).
The retail industry is constantly experiencing drastic change that result from growing consumer expectations, stiff competition, and economic pressure. This demands that retail companies would learn to make significant business strides with less. Therefore, most of them are coming up with intelligent business decisions on how they can exploit opportunities for improving their goods, services, and operations without necessarily increasing their operating cost. It is obvious that retailers cannot always manage to convert their businesses into “super-smart and super-adaptable” ventures (Rowley 2000, p.209). As such, they opt to turn to technology to create an efficient and flexible business solution to can drive results. One significant approach that retail companies are enhancing efficiency in their business processes is by integrating smart warehousing to perpetuate business process automation. The driving factors behind integrating smart warehousing into retail business process include enhancing individual employee and subsequent organizational productivity. Literature complied by Microsoft (2006, p.2) states that retail companies are triggered by the desire to enhance human workforce and subsequent organizational productivity, hence, the reason why they aim to automate their business processes. As such, integrating smart warehousing in their business processes would eliminate manual tasks and possible human errors that might result from reentry of data. Business process automation would also promote personal and team efficiency, which would in return promote quicker and highly predictable results. The need to make better and more accurate decisions is also another driving factor behind integrating smart warehousing into retail business process. As argued by Microsoft (2006, p.3), businesses need to provide real-time insights when undertaking major business metrics. As such, they opt to automate their business processes that can provide proactive alerts as well as notifications, which in return offer insight when undertaking important business process that are integral to business. Business process automation also provides businesses with real-time analytics that can help inventory managers to make better and quicker decisions. The need to promote operational excellence is another driving factor for integrating smart warehousing into retail business process. According to Rowley (2000, p.212), businesses recognize the need to ensure a reliable, high-quality consumer experience, which can be achieved through adopting high-quality business processes with utmost degree of reliability.
Literature indicates that a major strategy through which retail integrates smart warehousing into its business process is by equipping its homegrown legacy processes with modern techno logy to enhance efficient business collaboration with other business partners. To realize this integration, retail companies employ the state-of-art technological expertise using standards that include UCCnet Global Information Synchronization to meet growing business needs (Reynolds 2000, p.31). This integration promotes merchandise management by closely interlinking the supply chain thereby giving the company a strategic competitive benefit. A significant benefit that the retail can reap from integrating this technology into its business process is that it can easily be integrated into the legacy environment. The retail can also benefit by gaining significant integration with a variety of channels, which may not be achievable without the technology. Integration of this technology into the retail business process can further benefit the industry by enhancing agility employ rising like RFID (Peterson 1997, p.336).
London Drugs is an example of a company that has integrated its home-grown legacy process with modern technology to enhance efficiency. The company had historically conducted all critical business processes using legacy applications that were integrated on an AS/400 computer. The system was however outdated and costly to support, which saw the company missing important business opportunities. To address this situation, the company integrated smart warehousing into its business process by employing new process automation equipment that was founded on best-of-breed business planning and real-time integration. As a result, the company has integrated its business systems with computerized supply chain management and automated order generation and replenishment (Microsoft 2006, p.4). Today, the company is reaping significant benefits in that the solution is capable of significantly reducing human errors associated with manual processing. The solution further benefits this company by enhancing inventory movement, which does not only reduce the standing inventory but it also reduces cost associated with product movement along the supply chain and inventory management.
The retail also integrates smart warehousing into its business process by installing the Point Of Service system, which is an inventory system that enables inventory managers to track usage or possible changes in the inventory as well as analyze inventory levels so as to establish when reordering needs to be done. Companies implementing this system are able to manage inventory at the cash register as the system is capable of recording every sale when it takes place thereby enabling inventory managers to make decision on when ordering and merchandising should be done (Magal 2001, p.139).
A key benefit that the retail can reap from employing this technology is that can enhance real-time data flow within critical systems that primarily conduct traditional transactions thereby improving customer interaction. The system is also beneficial as it enhances inventory control be enabling inventory managers to monitor stock levels on individual item basis (Want 2004, p.66).
The Virgin Entertainment Company is an example of a retail company that has integrated smart warehousing in its business process by implementing the Point of Same system. As explained by Reynolds (2000, p.35), the company aimed to reduce losses it was incurring as a result of fraud and employee theft in the inventory. This is because the company relied on a traditional point-of-sale check process, which resulted to long-lag times and subsequent delays in establishing suspicious activities. To address the situation, the company automated its business process by integrating a computerized Point of Sale system, which ensured flexible information access and sharing throughout the company stores and systems. This development has benefited the company as it enables it to promote real-time data management, detect suspicious activities and evaluate long-term trends to help curb any possible losses within the company.
Although smart warehousing has proven to generate significant benefits that can promote desirable business advantages, the various risks associated with these technological advancements cannot be overlooked. According to Peterson (1997, p.340), smart warehousing is associated with major safety risks especially because it is characterized by high speed activities when moving units in and out of the warehouse. The modern warehouse activities range from cross-docking, palletizing, computerized conveyors and product identification. These high-speed activities can increase safety risks particularly when employee fatigue is evident. Automated conveyors within the warehouse can lead to crush hazards when moving goods crush against obstacles that include human beings. Pinch-point hazards may also be apparent when fast-paced systems catch loose attires, hair and accessories (Magal 2001, p.140). Large fulfillment centers in United States are characterized by accidents associated with smart warehousing. The US Bureau of statistics has for example recorded more than twenty warehouse deaths and other related injuries reported on yearly basis.
Literature indicates that smart warehousing is also associated with possible cyber attacks and enterprise operation interruption. According to Zimmerman (2004, p.89), most warehouses are using tablets to undertake a wide range of business operations since these equipments are convenient and provide instant access to critical information. Such information is however accessible to cyber attackers who can hack and illegally use important business information to accomplish malicious ventures. Although companies can purchase high-quality firewall to protect their systems, they still have to employ third party software to undertake their business operations, which increases the risk of having their systems hacked, infiltrated, and altered. Information compiled in the Washington Post stated that federal agents had investigated over 3,000 companies in the US and discovered that their automated warehousing systems had been hacked. This resulted to more than 100 billion dollars in annual loss, which confirms that the risk associated with cyber-attacks can ultimately shut down business operations.
Literature further indicates that smart warehousing is associated with the risk of distractions and possible decline in operational awareness. As explained by Magal (2001, p.142), introducing new automated warehousing systems can distract employees undertaking physical work intended to support the systems. This may lower operation awareness, which may ultimately result to erroneous commands that can lead to safety risks.
Literature has shown that e-commerce and smart warehousing can greatly benefit the retail industry and perpetuate significant business advantages. These benefits are coined into the unique smart warehousing systems that companies employ, the manner in which e-commerce is aligned to warehousing and the way smart warehousing is integrated into retail business process. Literature has shown that the AS/AR system is one of the smart warehousing systems that retail companies can employ to reap significant business advantage. This system is most appropriate in healthcare and health management companies where like specimens and laboratory supplies need to be stored. A real case example where the technology is used is in healthcare retail companies in the Mid-Atlantic region. As evidenced from the literature, the system is capable of generating important benefits to the retail industry, which include lowering operating costs, ensuring more accurate product identification, saving energy required to store or retrieve products and avoiding unnecessary disorganization of the inventory. Literature has also shown that the man-aboard system is a significant smart warehousing system that the retail can use to generate significant benefits. This system is largely applicable in most retail companies that manufacture small and delicate products in Korea. The MOB system can benefit retail be enhancing maximum space utilization as it can reach high locations within the warehouse. Similarly, employing the automatic loading and unloading vehicle in the retail industry can generate benefits that would ultimate enhance important business advantages. Literature has shown that the system is largely applicable in retail companies that deal with similar products that include poultry products, beverages and large volumes of chemicals. Retail companies employing this system can reap benefits that include improved safety, reduced operating costs, and limited damage of products.
Retail companies that align e-commerce to warehousing are also capable to reaping benefits that can greatly improve overall business. This integration can for example help retail companies to save overall amount of time spent to track items along the supply chain, easily verify details of products, and promote effective inventory management. Wal-mart, which has employed the RFID technology to align e-commerce with warehousing, has for example reaped significant benefits that contribute to overall business advantages. This is because the company has managed to use this technology in to prevent resource wastage and losses that can affect business performance.
The retail industry can further realize important benefits by integrating smart warehousing in their business processes, which can be achieved through integrating homegrown legacy processes with modern technology and through establishing point-of-service systems. London Drugs and Virgin Entertainment Company have for example integrated smart warehousing into their business processes and reaped significant benefits. On this note, it is apparent that the retail can generate significant benefits that include improved consumer interaction, reduced human error and greater inventory movement.
Study findings indicate that automated storage/retrieval, man-aboard and automatic loading and unloading vehicles are key smart warehousing systems employed in retail. Findings also show that the RFID is the main approach through which e-commerce is aligned to warehousing. Literature has further shown that the retail integrates smart warehousing into its business model by integrating the home-gown legacy processes with modern technology and through the creation of the Point-of-Service system. Study findings have further indicated that the major risks associated with smart warehousing include reduced human safety, possible cyber attacks, employee distraction, and reduced operational awareness.
E-commerce and smart warehousing play an integral role in benefit the retail industry, which eventually enhances business advantage. Smart warehousing systems like Automated Storage and retrieval systems, man-aboard and automatic loading and unloading vehicles are important equipments that can greatly benefit the retail industry. These systems save time, enhance accuracy, prevent product damages and increase space utilization. This promotes business advantage by reducing production costs, increasing productivity, and promoting overall revenue. Aligning e-commerce to warehousing, which can be achieved through employing the RFID technology is also beneficial to business in that it increases accuracy, saves time, and promotes overall productivity. In order to increase efficiency, the retail industry should integrate smart warehousing in its business process through integrating the homegrown legacy processes with the modern technology as well as creating a Point-of-Service system. This can benefit the retail industry by increasing customer interaction and inventory management and reducing possible errors.
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